Press Release

EX-99.1 2 dex991.htm PRESS RELEASE Press Release

Exhibit 99.1

Sun Microsystems Reports Results for

First Quarter Fiscal Year 2007

Revenue Growth and Strong Gross Margin Affirm Sun’s Business Strategy

and Focus on Innovation

SANTA CLARA, Calif. - October 26, 2006 - Sun Microsystems, Inc. (NASDAQ: SUNW) reported results today for its fiscal first quarter, which ended October 1, 2006.

Revenues for the first quarter of fiscal 2007 were $3.189 billion, an increase of 17 percent as compared with $2.726 billion for the first quarter of fiscal 2006. Year over year revenue increase resulted from both acquisitions and increasing acceptance of the Solaris^TM 10 Operating System, as well as growth in the services business. Computer Systems Products revenues increased 15 percent year over year, the third consecutive quarter of year over year revenue increase.

Net loss for the first quarter of fiscal 2007 on a GAAP basis was $56 million or a net loss of ($0.02) per share, as compared with a net loss of $123 million, or net loss of ($0.04) per share, for the first quarter of fiscal 2006.

GAAP net loss for the first quarter of fiscal 2007 included: $21 million of restructuring and related impairment of asset charges and a $7 million benefit for related tax effects, $58 million of stock-based compensation charges and $79 million of intangible asset amortization relating to recent acquisitions. The net impact of these four items was approximately ($0.04) per share.

Cash generated from operations for the first quarter was $157 million, and cash and marketable debt securities balance at the end of the quarter was $4.671 billion.

“It’s great to grow faster than the competition, maintain strong gross margins and see continued adoption of Solaris on HP, Dell and IBM computers,” said Jonathan Schwartz, CEO of Sun Microsystems. “Customers across the world are turning to Sun as the safe choice for open source innovation, for industry leading identity and security management platforms and for the most eco-responsible infrastructure to power the network.”

Sun has scheduled a conference call today to discuss its financial results for Q1 fiscal year 2007 at 1:30 p.m. (PT), which is being broadcast live at www.sun.com/investors.

About Sun Microsystems, Inc.

A singular vision — “The Network Is The Computer^TM” — guides Sun in the development of technologies that power the world’s most important markets. Sun’s philosophy of sharing innovation and building communities is at the forefront of the next wave of computing: the Participation Age. Sun can be found in more than 100 countries and on the Web at http://sun.com.

To supplement Sun’s consolidated financial statements presented in accordance with GAAP, Sun provides non-GAAP net income (loss) and non-GAAP net income (loss) per share data. The presentation of these non-GAAP financial measures should be considered in addition to Sun’s GAAP results and is not intended to be considered in isolation or as a substitute for the financial information prepared and presented in accordance with GAAP.

Sun’s management believes that these non-GAAP financial measures provide meaningful supplemental information regarding its performance by excluding certain charges, gains and tax effects that may not be indicative of Sun’s core business operating results. Sun believes that both management and investors benefit from referring to these non-GAAP financial measures in assessing Sun’s performance. These non-GAAP financial measures also facilitate comparisons to Sun’s historical performance and its competitors’ operating results. Sun includes these non-GAAP financial measures because management believes they are useful to investors in allowing for greater transparency with respect to supplemental information used by management in its financial and operational decision making. Non-GAAP measures are reconciled to comparable GAAP measures in the table entitled “Non-GAAP Calculation of Net Income (Loss) Excluding Special Items” following the text of this press release.

Sun, Sun Microsystems, the Sun logo, Solaris, and The Network Is The Computer are trademarks or registered trademarks of Sun Microsystems, Inc. in the United States and other countries.

Investor Contact:

Bret Schaefer

650-786-0123

bret.schaefer@sun.com

Press Contact:

Kathy Tom Engle

415-294-4368

kathy.engle@sun.com

SUN MICROSYSTEMS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(unaudited)

(in millions, except per share amounts)


	Three Months Ended
	October 1, 2006			September 25, 2005
Net revenues:
Products	$	1,959		$	1,704
Services		1,230			1,022

Total net revenues		3,189			2,726
Cost of sales:
Cost of sales-products (including stock-based compensation expense of $3 and $2) ⁽¹⁾		1,123			966
Cost of sales-services (including stock-based compensation expense of $8 and $7) ⁽¹⁾		678			558

Total cost of sales		1,801			1,524

Gross margin		1,388			1,202
Operating expenses:
Research and development (including stock-based compensation expense of $18 and $17) ⁽¹⁾		473			439
Selling, general and administrative (including stock-based compensation expense of $29 and $24) ⁽¹⁾		958			828
Restructuring and related impairment of long-lived assets		21			12
Purchased in-process research and development		—			60

Total operating expenses		1,452			1,339

Operating loss		(64	)		(137	)

Gain on equity investments, net		—			13
Interest and other income, net		42			44

Loss before income taxes		(22	)		(80	)
Provision for income taxes		34			43

Net loss	$	(56	)	$	(123	)

Net loss per common share-basic and diluted	$	(0.02	)	$	(0.04	)

Shares used in the calculation of net loss per common share-basic and diluted		3,497			3,407

(1)	For the three months ended October 1, 2006 and September 25, 2005, respectively.

SUN MICROSYSTEMS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(in millions)


	October 1, 2006		June 30, 2006*
	(unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	3,362	$	3,569
Short-term marketable debt securities		609		496
Accounts receivable, net		2,036		2,702
Inventories		584		540
Deferred and prepaid tax assets		214		209
Prepaid expenses and other current assets		747		757

Total current assets		7,552		8,273

Property, plant and equipment, net		1,583		1,812
Long-term marketable debt securities		700		783
Goodwill		2,566		2,610
Other acquisition-related intangible assets, net		848		929
Other non-current assets, net		645		675

	$	13,894	$	15,082

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Current portion of long-term debt and short-term borrowings	$	2	$	503
Accounts payable		1,292		1,446
Accrued payroll-related liabilities		661		777
Accrued liabilities and other		1,063		1,190
Deferred revenues		1,695		1,988
Warranty reserve		244		261

Total current liabilities		4,957		6,165

Long-term debt		582		575
Long-term deferred revenues		558		506
Other non-current obligations		1,388		1,492
Total stockholders’ equity		6,409		6,344

	$	13,894	$	15,082

*	Derived from audited financial statements

SUN MICROSYSTEMS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited, in millions)


	Three Months Ended
	October 1, 2006			September 25, 2005
Cash flows from operating activities:
Net loss	$	(56	)	$	(123	)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization		123			143
Amortization of other acquisition related intangible assets		81			46
Deferred taxes		(3	)		—
Impairment of assets		8			—
Gain on investments, net		—			(13	)
Stock-based compensation expense		58			50
Purchased in-process research and development		—			60
Changes in operating assets and liabilities:
Accounts receivable, net		672			449
Inventories		(71	)		67
Prepaid and other assets		36			203
Accounts payable		(151	)		(174	)
Other liabilities		(540	)		(484	)

Net cash provided by operating activities		157			224

Cash flows from investing activities:
Purchases of marketable debt securities		(675	)		(454	)
Proceeds from sales of marketable debt securities		515			2,818
Proceeds from maturities of marketable debt securities		136			75
Proceeds from sales of equity investments, net		7			9
Proceeds from sale (purchases) of property, plant and equipment, net		160			(48	)
Acquisition of spare parts and other assets		(34	)		(20	)
Payments for acquisitions, net of cash acquired		—			(3,150	)

Net cash provided by (used in) investing activities		109			(770	)

Cash flows from financing activities:
Proceeds from issuance of common stock, net		27			3
Principal payments on borrowings and other obligations		(500	)		—

Net cash provided by (used in) financing activities		(473	)		3

Net decrease in cash and cash equivalents		(207	)		(543	)
Cash and cash equivalents, beginning of period		3,569			2,051

Cash and cash equivalents, end of period	$	3,362		$	1,508

SUN MICROSYSTEMS, INC.

NON-GAAP CALCULATION OF NET INCOME (LOSS) EXCLUDING SPECIAL ITEMS

(unaudited)

(in millions, except per share amounts)


	Three Months Ended
	October 1, 2006			September 25, 2005
Calculation of net loss excluding special items:
Net loss, *	$	(56	)	$	(123	)
Restructuring and related impairment of long-lived assets		21			12
Purchased in-process research and development		—			60
Gain on equity investments, net		—			(13	)
Related tax effects		(7	)		(4	)

Net loss excluding special items	$	(42	)	$	(68	)

Net loss excluding special items per common share – basic and diluted	$	(0.01	)	$	(0.02	)

Shares used in the calculation of net loss excluding special items per common share – basic and diluted		3,497			3,407

*	Net loss for the three months ended October 1, 2006 and September 25, 2005 included $58 million and $50 million of stock-based compensation expense or approximately $0.02 per share and $0.01 per share, respectively.

**	Net loss for the three months ended October 1, 2006 and September 25, 2005 included $79 million and $122 million of purchase price accounting adjustments and intangible asset amortization relating to our fiscal 2006 acquisitions or approximately $0.02 per share and $0.04 per share, respectively.

SUN MICROSYSTEMS, INC.

OPERATIONS ANALYSIS – CONSOLIDATED (UNAUDITED)


STATEMENTS OF OPERATIONS (in millions except per share amounts)	FY 2007			FY 2006															FY 2005
	Q1			Q1			Q2			Q3			Q4			FY06			Q1			Q2			Q3			Q4			FY05
																			(Restated)			(Restated)			(Restated)
NET REVENUES
Products	$	1,959		$	1,704		$	2,108		$	2,035		$	2,524		$	8,371		$	1,676		$	1,840		$	1,683		$	1,927		$	7,126
Services		1,230			1,022			1,229			1,142			1,304			4,697			952			1,001			944			1,047			3,944

TOTAL		3,189			2,726			3,337			3,177			3,828			13,068			2,628			2,841			2,627			2,974			11,070
Growth vs. prior year (%)		17.0	%		3.7	%		17.5	%		20.9	%		28.7	%		18.0	%		3.6	%		-1.6	%		-0.9	%		-4.4	%		-1.0	%
Growth vs. prior quarter (%)		-16.7	%		-8.3	%		22.4	%		-4.8	%		20.5	%					-15.5	%		8.1	%		-7.5	%		13.2	%

COST OF SALES
Products		1,123			966			1,223			1,152			1,486			4,827			949			1,065			975			1,130			4,119
Cost of settlement		0			0			0			0			0			0			55			0			0			0			55

Total		1,123			966			1,223			1,152			1,486			4,827			1,004			1,065			975			1,130			4,174
Services		678			558			693			658			703			2,612			551			578			565			613			2,307

TOTAL		1,801			1,524			1,916			1,810			2,189			7,439			1,555			1,643			1,540			1,743			6,481
% of revenue		56.5	%		55.9	%		57.4	%		57.0	%		57.2	%		56.9	%		59.2	%		57.8	%		58.6	%		58.6	%		58.5	%

GROSS MARGIN
Products		836			738			885			883			1,038			3,544			727			775			708			797			3,007
% of product revenue		42.7	%		43.3	%		42.0	%		43.4	%		41.1	%		42.3	%		43.4	%		42.1	%		42.1	%		41.4	%		42.2	%
Cost of settlement		0			0			0			0			0			0			(55	)		0			0			0			(55	)
% of product revenue		0.0	%		0.0	%		0.0	%		0.0	%		0.0	%		0.0	%		-3.3	%		0.0	%		0.0	%		0.0	%		-0.8	%

Total product margin		836			738			885			883			1,038			3,544			672			775			708			797			2,952
% of product revenue		42.7	%		43.3	%		42.0	%		43.4	%		41.1	%		42.3	%		40.1	%		42.1	%		42.1	%		41.4	%		41.4	%

Services gross margin		552			464			536			484			601			2,085			401			423			379			434			1,637
% of service revenue		44.9	%		45.4	%		43.6	%		42.4	%		46.1	%		44.4	%		42.1	%		42.3	%		40.1	%		41.5	%		41.5	%

Total excluding settlement		1,388			1,202			1,421			1,367			1,639			5,629			1,128			1,198			1,087			1,231			4,644
% of revenue		43.5	%		44.1	%		42.6	%		43.0	%		42.8	%		43.1	%		42.9	%		42.2	%		41.4	%		41.4	%		42.0	%
Cost of settlement		0			0			0			0			0			0			(55	)		0			0			0			(55	)
% of revenue		0.0	%		0.0	%		0.0	%		0.0	%		0.0	%		0.0	%		-2.1	%		0.0	%		0.0	%		0.0	%		-0.5	%

TOTAL GROSS MARGIN		1,388			1,202			1,421			1,367			1,639			5,629			1,073			1,198			1,087			1,231			4,589
% of revenue		43.5	%		44.1	%		42.6	%		43.0	%		42.8	%		43.1	%		40.8	%		42.2	%		41.4	%		41.4	%		41.5	%

R&D		473			439			541			523			543			2,046			416			447			450			472			1,785
% of revenue		14.8	%		16.1	%		16.2	%		16.5	%		14.2	%		15.7	%		15.8	%		15.7	%		17.1	%		15.9	%		16.1	%
PURCHASED IN PROCESS R&D		0			60			0			0			0			60			0			0			0			0			0
% of revenue		0.0	%		2.2	%		0.0	%		0.0	%		0.0	%		0.5	%		0.0	%		0.0	%		0.0	%		0.0	%		0.0	%
SG&A		958			828			1,056			1,020			1,133			4,037			670			726			735			788			2,919
% of revenue		30.0	%		30.4	%		31.6	%		32.1	%		29.6	%		30.9	%		25.5	%		25.6	%		28.0	%		26.5	%		26.4	%
RESTRUCTURING CHARGES		21			12			10			36			228			286			108			24			44			86			262
% of revenue		0.7	%		0.4	%		0.3	%		1.1	%		6.0	%		2.2	%		4.1	%		0.8	%		1.7	%		2.9	%		2.4	%
IMPAIRMENT EXPENSE		0			0			0			0			70			70			0			0			0			0			0
% of revenue		0.0	%		0.0	%		0.0	%		0.0	%		1.8	%		0.5	%		0.0	%		0.0	%		0.0	%		0.0	%		0.0	%

TOTAL OPERATING EXPENSES		1,452			1,339			1,607			1,579			1,974			6,499			1,194			1,197			1,229			1,346			4,966
% of revenue		45.5	%		49.1	%		48.2	%		49.7	%		51.6	%		49.7	%		45.4	%		42.1	%		46.8	%		45.3	%		44.9	%

OPERATING INCOME (LOSS)		(64	)		(137	)		(186	)		(212	)		(335	)		(870	)		(121	)		1			(142	)		(115	)		(377	)
Operating margin		-2.0	%		-5.0	%		-5.6	%		-6.7	%		-8.8	%		-6.7	%		-4.6	%		0.0	%		-5.4	%		-3.9	%		-3.4	%

Interest and other income, net		42			44			25			26			19			114			31			33			37			32			133
Gain (loss) on equity investments, net		0			13			14			4			(4	)		27			(4	)		9			2			(1	)		6
Settlement income		0			0			0			0			54			54			0			0			54			0			54
PRETAX INCOME (LOSS)		(22	)		(80	)		(147	)		(182	)		(266	)		(675	)		(94	)		43			(49	)		(84	)		(184	)
Pretax income (loss) margin		-0.7	%		-2.9	%		-4.4	%		-5.7	%		-6.9	%		-5.2	%		-3.6	%		1.5	%		-1.9	%		-2.8	%		-1.7	%

INCOME TAX PROVISION (BENEFIT)		34			43			76			35			35			189			39			39			(21	)		(134	)		(77	)
TAX RATE (%)		N/A			N/A			N/A			N/A			N/A			N/A			N/A			N/A			N/A			N/A			N/A

NET INCOME (LOSS) (Reported)*****	$	(56	)	$	(123	)	$	(223	)	$	(217	)	$	(301	)	$	(864	)	$	(133	)	$	4		$	(28	)	$	50		$	(107	)
Growth vs. prior year (%)		54.5	%		7.5	%		-5675.0	%		-675.0	%		-702.0	%		-707.5	%		53.8	%		103.2	%		96.3	%		-93.6	%		72.4	%
Growth vs. prior quarter (%)		81.4	%		- 346.0	%		-81.3	%		2.7	%		-38.7	%					-117.1	%		103.0	%		-800.0	%		278.6	%
Net income (loss) margin		-1.8	%		-4.5	%		-6.7	%		-6.8	%		-7.9	%		-6.6	%		-5.1	%		0.1	%		-1.1	%		1.7	%		-1.0	%

EPS (Diluted) (Reported)	$	(0.02	)	$	(0.04	)	$	(0.07	)	$	(0.06	)	$	(0.09	)	$	(0.25	)	$	(0.04	)	$	0.00		$	(0.01	)	$	0.01		$	(0.03	)
Growth vs. prior year (%)		50.0	%		0.0	%		-100.0	%		-500.0	%		-1000.0	%		-733.3	%		55.6	%		100.0	%		95.7	%		-95.7	%		75.0	%
Growth vs. prior quarter (%)		77.8	%		- 500.0	%		-75.0	%		14.3	%		-50.0	%					-117.4	%		100.0	%		N/A			100.0	%

SHARES (CSE)(Diluted)		3,497			3,407			3,424			3,443			3,475			3,437			3,343			3,400			3,376			3,410			3,368
OUTSTANDING SHARES		3,601			3,409			3,458			3,470			3,505			3,505			3,344			3,375			3,381			3,408			3,408

The information above has been restated to reflect the adjustments that are further discussed in our Annual Report on Form 10-K for the fiscal year ended June 30, 2005, filed with the SEC on September 13, 2005.


	FY 2007		FY 2006										FY 2005
(in millions)	Q1		Q1		Q2		Q3		Q4		FY06		Q1		Q2		Q3		Q4		FY05
REVENUE BY GEOGRAPHY
UNITED STATES ($M)	1,296		1,159		1,373		1,325		1,523		5,380		1,105		1,130		982		1,175		4,392
Growth vs. prior year (%)	11.8	%	4.9	%	21.5	%	34.9	%	29.6	%	22.5	%	-4.9	%	-6.9	%	-5.3	%	-13.3	%	-7.9	%
Growth vs. prior quarter (%)	-14.9	%	-1.4	%	18.5	%	-3.5	%	14.9	%			-18.5	%	2.3	%	-13.1	%	19.7	%
INTERNATIONAL AMERICAS ($M)	217		141		194		207		273		815		110		165		144		171		590
Growth vs. prior year (%)	53.9	%	28.2	%	17.6	%	43.8	%	59.6	%	38.1	%	-5.2	%	8.6	%	5.9	%	8.2	%	5.0	%
Growth vs. prior quarter (%)	-20.5	%	-17.5	%	37.6	%	6.7	%	31.9	%			-30.4	%	50.0	%	-12.7	%	18.8	%
EMEA ($M)	1,131		970		1,239		1,119		1,375		4,703		973		1,037		1,009		1,133		4,152
Growth vs. prior year (%)	16.6	%	0.0	%	19.5	%	10.9	%	21.4	%	13.3	%	18.4	%	0.6	%	0.7	%	4.2	%	5.3	%
Growth vs. prior quarter (%)	-17.7	%	-14.4	%	27.7	%	-9.7	%	22.9	%			-10.5	%	6.6	%	-2.7	%	12.3	%
APAC ($M)	545		456		531		526		657		2,170		440		509		492		495		1,936
Growth vs. prior year (%)	19.5	%	3.6	%	4.3	%	6.9	%	32.7	%	12.1	%	0.9	%	3.7	%	3.4	%	-2.9	%	1.2	%
Growth vs. prior quarter (%)	-17.0	%	-7.9	%	16.4	%	-0.9	%	24.9	%			-13.7	%	15.7	%	-3.3	%	0.6	%
% of Total Revenue
UNITED STATES (%)	40.6	%	42.5	%	41.2	%	41.7	%	39.8	%	41.2	%	42.1	%	39.8	%	37.4	%	39.6	%	39.7	%
INTERNATIONAL AMERICAS (%)	6.8	%	5.2	%	5.8	%	6.5	%	7.1	%	6.2	%	4.2	%	5.8	%	5.5	%	5.7	%	5.3	%
EMEA (%)	35.5	%	35.6	%	37.1	%	35.2	%	35.9	%	36.0	%	37.0	%	36.5	%	38.4	%	38.1	%	37.5	%
APAC (%)	17.1	%	16.7	%	15.9	%	16.6	%	17.2	%	16.6	%	16.7	%	17.9	%	18.7	%	16.6	%	17.5	%

PRODUCTS AND SERVICES REVENUE
COMPUTER SYSTEMS PRODUCTS ($M)	1,468		1,274		1,438		1,474		1,811		5,997		1,354		1,505		1,391		1,576		5,826
Growth vs. prior year (%)	15.2	%	-5.9	%	-4.5	%	6.0	%	14.9	%	2.9	%	5.6	%	-4.0	%	1.9	%	-3.8	%	-0.5	%
Growth vs. prior quarter (%)	-18.9	%	-19.2	%	12.9	%	2.5	%	22.9	%			-17.4	%	11.2	%	-7.6	%	13.3	%
DATA MANAGEMENT PRODUCTS ($M)	491		430		670		561		713		2,374		322		335		292		351		1,300
Growth vs. prior year (%)	14.2	%	33.5	%	100.0	%	92.1	%	103.1	%	82.6	%	-8.5	%	-10.9	%	-15.6	%	-17.8	%	-13.4	%
Growth vs. prior quarter (%)	-31.1	%	22.5	%	55.8	%	-16.3	%	27.1	%			-24.6	%	4.0	%	-12.8	%	20.2	%
SUPPORT SERVICES ($M)	971		835		953		904		986		3,678		745		774		734		778		3,031
Growth vs. prior year (%)	16.3	%	12.1	%	23.1	%	23.2	%	26.7	%	21.3	%	1.9	%	3.9	%	0.4	%	-1.8	%	1.1	%
Growth vs. prior quarter (%)	-1.5	%	7.3	%	14.1	%	-5.1	%	9.1	%			-5.9	%	3.9	%	-5.2	%	6.0	%
CLIENT SOLUTIONS & EDUCATIONAL SERVICES ($M)	259		187		276		238		318		1,019		207		227		210		269		913
Growth vs. prior year (%)	38.5	%	-9.7	%	21.6	%	13.3	%	18.2	%	11.6	%	21.1	%	14.1	%	0.5	%	6.7	%	9.9	%
Growth vs. prior quarter (%)	-18.6	%	-30.5	%	47.6	%	-13.8	%	33.6	%			-17.9	%	9.7	%	-7.5	%	28.1	%

NET BOOKINGS ($M)**	3,053		2,413		3,018		2,680		3,376		11,487		2,453		2,976		2,536		3,078		11,043
Growth vs. prior year (%)	26.5	%	-1.6	%	1.4	%	5.7	%	9.7	%	4.0	%	-3.3	%	-0.1	%	-3.1	%	-3.2	%	-2.4	%
Growth vs. prior quarter (%)	-9.6	%	-21.6	%	25.1	%	-11.2	%	26.0	%			-22.8	%	21.3	%	-14.8	%	21.4	%
PRODUCT BACKLOG ($M)*	1,028		718		1,021		980		1,099				659		792		701		805

*	Our product backlog includes orders for which customer-requested delivery is scheduled within six months and orders that have been specified by the customers for which products have been shipped but revenue has been deferred.

**	The numbers presented prior to Q1 fiscal 2007 did not contain Storage Tek information and should not be viewed as comparable.


BALANCE SHEETS (in millions)	FY 2007			FY 2006														FY 2005
BALANCE SHEETS (in millions)	Q1			Q1			Q2			Q3			Q4					Q1			Q2			Q3			Q4
																		(Restated)			(Restated)			(Restated)
CASH & ST INVESTMENTS	$	3,971		$	2,501		$	2,449		$	2,872		$	4,065				$	3,520		$	3,639		$	3,135		$	3,396
ACCOUNTS RECEIVABLE, NET		2,036			2,087			2,289			2,301			2,702					1,730			1,840			2,020			2,231
RAW MATERIALS		119			82			95			49			68					71			64			75			48
WORK IN PROCESS		92			183			134			125			97					158			157			121			121
FINISHED GOODS		373			286			321			400			375					187			208			192			262

TOTAL INVENTORIES		584			551			550			574			540					416			429			388			431
OTHER CURRENT ASSETS		961			998			933			966			966					1,102			1,220			1,419			1,133

TOTAL CURRENT ASSETS		7,552			6,137			6,221			6,713			8,273					6,768			7,128			6,962			7,191
PP&E, NET		1,583			1,901			1,914			1,880			1,812					1,918			1,903			1,851			1,769
GOODWILL		2,566			2,466			2,472			2,487			2,610					406			406			441			441
LT MARKETABLE DEBT SECURITIES		700			2,032			1,827			1,557			783					3,913			3,825			4,222			4,128
OTHER NON-CURRENT ASSETS, NET		1,493			1,938			1,874			1,733			1,604					804			774			704			661

TOTAL ASSETS		13,894			14,474			14,308			14,370			15,082					13,809			14,036			14,180			14,190

SHORT TERM BORROWINGS		2			512			508			505			503					0			0			0			0
ACCOUNTS PAYABLE		1,292			1,091			1,214			1,315			1,446					807			963			1,071			1,167
ACCRUED LIABILITIES & OTHER		1,968			2,147			1,905			1,918			2,228					2,108			2,049			2,090			1,951
DEFERRED REVENUES		1,695			1,507			1,541			1,684			1,988					1,346			1,313			1,399			1,648

TOTAL CURRENT LIABILITIES		4,957			5,257			5,168			5,422			6,165					4,261			4,325			4,560			4,766
LT DEBT		582			603			593			585			575					1,163			1,145			1,116			1,123
LT DEFERRED REVENUES		558			549			469			472			506					524			519			519			544
OTHER NON-CURRENT OBLIGATIONS		1,388			1,410			1,585			1,504			1,492					1,504			1,482			1,429			1,083
STOCKHOLDERS’ EQUITY		6,409			6,655			6,493			6,387			6,344					6,357			6,565			6,556			6,674

TOTAL LIABILITIES & SE	$	13,894		$	14,474		$	14,308		$	14,370		$	15,082				$	13,809		$	14,036		$	14,180		$	14,190


CASH FLOW (in millions)	Q1			Q1			Q2			Q3			Q4			FY06		Q1			Q2			Q3			Q4			FY05
OPERATING ACTIVITIES	$	157		$	224		$	(191	)	$	197		$	410		$	640	$	124		$	52		$	(2	)	$	195		$	369
INVESTING ACTIVITIES		109			(770	)		(214	)		217			1,346			579		157			(475	)		(345	)		238			(425	)
FINANCING ACTIVITIES		(473	)		3			90			34			172			299		(235	)		99			18			84			(34	)

KEY METRICS	Q1			Q1			Q2			Q3			Q4					Q1			Q2			Q3			Q4
INVENTORY TURNS (hist.)		13.6			13.4			13.7			10.8			15.3					15.9			14.7			15.0			14.5
INVENTORY TURNS-PRODUCT ONLY (hist.)		8.8			8.6			8.8			6.9			9.9					10.3			9.4			9.7			9.3
DAYS SALES OUTSTANDING		57			69			62			65			64					59			58			69			68
DAYS PAYABLES OUTSTANDING		(65	)		(64	)		(57	)		(65	)		(59	)				(47	)		(53	)		(63	)		(60	)
DAYS OF SUPPLY ON HAND		29			33			26			29			22					24			23			23			22
L-T DEBT/EQUITY (%)		9.1	%		9.1	%		9.1	%		9.2	%		9.1	%				18.3	%		17.4	%		17.0	%		16.8	%
ROE (12 mo. avg.)(%)		-12.4	%		-1.5	%		-4.9	%		-7.8	%		-13.4	%				-3.8	%		-1.6	%		9.6	%		-1.6	%
BOOK VALUE PER SHARE ($)		1.78			1.95			1.89			1.84			1.81					1.90			1.95			1.94			1.96
PRICE PER SHARE @ CLOSE		4.95			3.87			4.36			4.97			4.15					4.13			5.44			4.03			3.73
ROA (12 mo. avg.)(%)		-5.5	%		-0.7	%		-2.3	%		-3.6	%		-5.9	%				-1.7	%		-0.7	%		4.4	%		-0.8	%
DEPREC. & AMORT. ($M)		204			189			265			228			224					187			191			191			198
CAPITAL INVESTMENTS, NET ($M)*		(160	)		48			82			63			122					56			85			58			58
SPARES INVESTMENTS ($M)		34			20			20			13			20					12			30			26			22
NUMBER OF EMPLOYEES		36,250			38,588			38,802			38,312			38,061					32,449			31,855			31,999			31,117
REV. PER EMP. (12 mo.)($K)		373.3			289.4			300.6			314.8			343.3					347.5			352.5			350.2			355.8
GM PER EMP. (12mo.)($K)		160.4			122.3			127.3			134.6			147.9					140.9			143.2			143.2			147.5
OP EXP AS % OF REV (12mo.)		48.9	%		45.8	%		47.3	%		48.1	%		49.7	%				50.0	%		49.3	%		46.9	%		44.9	%
NET INCOME (LOSS) PER EMP. (12mo.)($K)		(22.0	)		(2.5	)		(8.4	)		(13.2	)		(22.7	)				(7.2	)		(3.2	)		19.5			(3.4	)

*	Included in Q1 fiscal 2007 capital investments, net, are the cash proceeds of approximately $214 million from the sale of our Newark, California facility.


NON-GAAP CALCULATION OF NET INCOME (LOSS) EXCLUDING SPECIAL ITEMS (in millions except per share amounts)	FY2007			FY 2006															FY 2005
	Q1			Q1			Q2			Q3			Q4			FY06			Q1			Q2			Q3*			Q4***			FY05*
																			(Restated)			(Restated)			(Restated)
GAAP net income (loss)**, ***	$	(56	)	$	(123	)	$	(223	)	$	(217	)	$	(301	)	$	(864	)	$	(133	)	$	4		$	(28	)	$	50		$	(107	)
Purchased in-process research and development		0			60			0			0			0			60			0			0			0			0			0
Restructuring and related impairment of long-lived assets		21			12			10			36			228			286			108			24			44			86			262
Loss (gain) on equity investments, net		0			(13	)		(14	)		(4	)		4			(27	)		4			(9	)		(2	)		1			(6	)
Impairment expense		0			0			0			0			70			70			0			0			0			0			0
Settlement income		0			0			0			0			(54	)		(54	)		0			0			(54	)		0			(54	)
Settlement of litigation**		0			0			0			0			0			0			55			0			0			0			55
Valuation allowance on deferred tax assets		0			0			0			0			0			0			0			0			(34	)		0			(34	)
Related tax effects		(7	)		(4	)		(3	)		(4	)		(8	)		(19	)		(7	)		(6	)		(7	)		(6	)		(26	)

Net income (loss) excluding special items	$	(42	)	$	(68	)	$	(230	)	$	(189	)	$	(61	)	$	(548	)	$	27		$	13		$	(81	)	$	131		$	90
Growth vs. prior year (%)		38.2	%		-351.9	%		-1869.2	%		133.3	%		-146.6	%		-708.9	%		110.3	%		113.0	%		68.1	%		174.4	%		111.4	%
EPS (Diluted) excluding special items	$	(0.01	)	$	(0.02	)	$	(0.07	)	$	(0.06	)	$	(0.02	)	$	(0.16	)	$	0.01		$	0.00		$	(0.02	)	$	0.04		$	0.03
Growth vs. prior year (%)		50.0	%		-300.0	%		-100.0	%		-100.0	%		-150.0	%		633.3	%		112.5	%		100.0	%		75.0	%		180.0	%		112.5	%

SHARES (CSE)(Diluted)		3,497			3,407			3,424			3,443			3,475			3,437			3,356			3,400			3,376			3,410			3,368
OUTSTANDING SHARES		3,601			3,409			3,458			3,470			3,505			3,505			3,344			3,375			3,381			3,408			3,408

The non-GAAP calculation of Net income (loss) excluding special items for the three month period ended March 27, 2005 and year ended June 30, 2005 includes a $69 million benefit for the impact of the change in Dutch withholding tax legislation which was effected in the third quarter of fiscal 2005 and a $213 million benefit arising from adjustments to our income tax reserves resulting from the conclusion of a U.S. and foreign income tax audit.

**	Included in Cost of sales – products

***	The non-GAAP calculation of net income excluding special items for the three months ended June 30, 2005 includes a $213 million benefit arising from adjustments to our income tax reserves resulting from the conclusion of a U.S. and foreign income tax audit.

****

Net loss for the three months ended October 1, 2006, included $58 million of stock-based compensation expense or approximately $0.02 per share. Net loss for the three months ended June 30, 2006, three months ended March 26, 2006, three months ended December 25, 2005 and three months ended September 25, 2005 included $63 million, $57 million, $55 million and $50 million of stock-based compensation expense or approximately $0.02 per share, $0.02 per share, $0.02 per share and $0.01 per share, respectively.

*****

Net loss for the three months ended October 1, 2006, included $79 million of purchase price accounting adjustments and intangible asset amortization relating to our fiscal 2006 acquisitions or approximately $0.02 per share. Net loss for the three months ended June 30, 2006, three months ended March 26, 2006, three month ended December 25, 2005 and three months ended September 25, 2005 included $86 million, $87 million, $145 million and $122 million of purchase price accounting adjustments and intangible asset amortization relating to our fiscal 2006 acquisitions or approximately $0.02 per share, $0.03 per share, $0.04 per share and $0.04 per share, respectively.